Current Challenges in the Olive Oil Market: A Paradox Unraveled
The world of olive oil is facing turbulent times. To phrase it differently, we are experiencing a paradoxical situation. In recent years, farmers have grappled with poor harvests that have driven prices up and reduced consumption . Now that they are enjoying a fruitful campaign projected to exceed 1.4 million tons , their situation remains precarious. The prices they receive have declined significantly, resulting in a major income gap for the producers.
Government’s Strategic Move in Olive Oil Management
In light of this scenario, the Government has decided to take action, equipping itself with a “ nuclear button ” that, should the need arise, will stabilize the market in the 2025-2026 campaign. The plan? To strategically withdraw oil from the market if the harvest is particularly plentiful.
Understanding the Recent Developments
The Ministry of Agriculture aims to preempt potential imbalances in the extra virgin olive oil sector. With promising outlooks for the 2024-2025 campaign and the fear that an abundant harvest might adversely affect the Spanish market, the Government is preparing its administrative framework to address this challenge. The primary method? Withdrawing oil from olive mills .
Legal Framework for Oil Withdrawal
The process of withdrawing olive oil is not as simple as it sounds. The European regulation allows states to activate a “marketing standard” for the olive oil sector to “improve and stabilize” the market. This framework has been enacted in Spain via Royal Decree 84/2021 , which stipulates that under justified circumstances, products can be withdrawn from the markets for future use or repurposing.
Consultation for Future Plans
Complicating factors include the requirement for consultations with regional governments and organizations representing the sector. Recently, the Ministry of Agriculture opened a public consultation, allowing stakeholders to voice their opinions regarding the new order for the 2025/2026 campaign. Input can be submitted until the upcoming Wednesday .
The Context Behind This Decision
The rationale for these measures stems from the latest data within the olive oil sector. Although the 2022/2023 and 2023/2024 harvests were meager (667,000 and 854,500 tons respectively), which led to soaring prices, the current forecast is vastly different.
This current campaign, which commenced in October and runs until September, is expected to yield more than 1.4 million tons . In march, minister Luis Planas even mentioned a figure of 1.42 million . Some optimistic analysts project higher numbers for the upcoming campaign.
Impact on Prices
In 2023 and 2024, coinciding with the poor harvests, the price of extra virgin olive oil (AOVE) was nearly €9 per kilo. Now, with a generous campaign , that number has plummeted to €3.59 . This steep decline poses a serious problem for farmers. Juan Luis Ávila from COAG recently expressed concern that while consumers pay around €6 per liter, producers receive less than €3.5 , barely covering production costs.
Why Are Prices Falling?
This brings forth a crucial question: why are prices so low? Farmers argue that the market prices are far below what they should be, given current conditions. Miguel Padilla from COAG highlighted that the price discrepancy exceeds €2 per kilo. He believes that awareness and action are vital, as speculation runs rampant in the market.
To support their argument, farmers even presented a report estimating that AOVE should be priced at €5.55-€6.14 per kilo during the current campaign, far from what growers are receiving. “Speculation is rampant,” lamented Cristóbal Cano , the secretary-general of UPA, noting that price structures should align better with supply and demand.
Implications of the New Regulation
The Government’s new plan for the 2025-2026 campaign aims to stabilize the market by utilizing a simple yet effective strategy: product withdrawal . This mechanism will only be activated if excessively high production estimates threaten market equilibrium. Should this occur, it would mark the first time that the plan has been used to rebalance the market under Minister Planas’s directive.
Sector Perspectives on the New Measures
Various organizations—including Asaja, COAG, UPA, UDU, and Agro-food Cooperatives—view this initiative positively. They believe it is essential to have a ready response plan. Dcoop representatives emphasized the necessity of this proactive approach to prevent price collapse.
However, not everyone shares the same positivity. In Murcia , some producers are skeptical that withdrawing oil from the market will yield effective solutions.
In summary, the situation in the olive oil market is multifaceted and requires ongoing analysis, as both producers and consumers await the unfolding of the upcoming campaigns.
Images | Gobierno de Castilla-La Mancha (Flickr) and Deoleo